The Gipper, Part 2

The New York Times
August 31, 2005
U.S. Poverty Rate Was Up Last Year
By DAVID LEONHARDT

WASHINGTON, Aug. 30 - Even as the economy grew, incomes stagnated last year and the poverty rate rose, the Census Bureau reported Tuesday. It was the first time on record that household incomes failed to increase for five straight years.

The portion of Americans without health insurance remained roughly steady at 16 percent, the bureau said. A smaller percentage of people were covered by their employers, but two big government programs, Medicaid and military insurance, grew.

The census's annual report card on the nation's economic well-being showed that a four-year-old expansion had still not done much to benefit many households. Median pretax income, $44,389, was at its lowest point since 1997, after inflation.

Though the reasons are not wholly clear, economists say technology and global trade appear to be holding down pay for many workers. The rising cost of health care benefits has also eaten into pay increases.

After the report's release, Bush administration officials said that the job market had continued to improve since the end of 2004 and that they hoped incomes were now rising and poverty was falling. The poverty rate "is the last, lonely trailing indicator of the business cycle," said Elizabeth Anderson, chief of staff in the economics and statistics administration of the Commerce Department.

The census numbers also do not reflect the tax cuts passed in President Bush's first term, which have lifted the take-home pay of most families.

But the biggest tax cuts went to high-income families already getting raises, Democrats said Tuesday. The report, they added, showed that the cuts had failed to stimulate the economy as the White House had promised.

"The growth in the economy is not going to families," said Senator Jack Reed, Democrat of Rhode Island. "It's in stark contrast to what happened during the Clinton administration."

The main theme of the census report seemed to be the lingering weakness in compensation and benefits, even as the ranks of the unemployed have dwindled. Fewer people are getting health insurance from their employers or from policies of family members, while raises have generally trailed inflation.

Last year, households kept income from falling by working more hours than they did in 2003, the data showed. The median pay of full-time male workers declined more than 2 percent in 2004, to $40,800; for women, the median dropped 1 percent, to $31,200. When some people switch to full-time work from part-time, they can keep household incomes from dropping even when the pay of individual workers is declining.

"It looks like the gains from the recovery haven't really filtered down," said Phillip L. Swagel, a resident scholar at the American Enterprise Institute, a conservative research group in Washington. "The gains have gone to owners of capital and not to workers."

There has always been a lag between the end of a recession and the resumption of raises, Mr. Swagel added, but the length of this lag has been confounding.

In addition, the poverty rate rose last year for working-age people, those ages 18 to 64. The portion of people age 65 and older in poverty fell, while child poverty was essentially flat.

Over all, the poverty rate increased to 12.7 percent, from 12.5 percent in 2003. Poverty levels have changed only modestly in the last three decades, rising in the 1980's and falling in the 1990's, after having dropped sharply in the 1960's. They reached a low of 11.1 percent in 1973, from more than 22 percent in 1960.

In the same three decades that poverty has remained fairly steady, median incomes have grown significantly, lifting living standards for most families. After adjusting for inflation, the income of the median household, the one making more than half of all others and less than half of the rest, earns almost one-third more now than it did in the late 1960's.

But income inequality has also risen in that time and was near all-time highs last year, the bureau reported. The census numbers do not include gains from stock holdings, which would further increase inequality.

In New York, the poverty rate rose last year to 20.3 percent, from 19 percent, making it the only city of more than one million people with a significant change. The reason for the increase was not obvious.

Among populous counties, the Bronx had the fourth-highest poverty rate in the nation, trailing three counties on the Texas-Mexico border.

Many economists say the government's statistics undercount poverty in New York and other major cities because the numbers are not adjusted for cost of living. A family of two parents and two children is considered poor if it makes less than $19,157 a year, regardless of whether it lives in a city where $500,000 buys a small apartment or a mansion.

Households in New Hampshire made more last year ($57,400 at the median) than in any other state, while those in West Virginia made the least ($32,600). Fairfax County in Virginia ($88,100) and Somerset County in New Jersey ($84,900) were the counties with the highest earnings, the census said.

The decline in employer-provided health benefits came after four years of rapidly rising health costs. Some of the increases stemmed from inefficiencies in the health care system; others were a result of new treatments that improved health and prolonged life but were often expensive.

Either way, the bill for health care has risen, and more companies are deciding not to pay it for some workers. The percentage of people getting health insurance from an employer fell to 59.8 percent last year, from 63.6 percent in 2000. The percentage receiving it from the government rose to 27.2 percent, from 24.7 percent.

The trend is likely to continue unless the job market becomes as tight as it was in the late 1990's and companies decide they must offer health insurance to retain workers, said Paul Fronstin, director of the health research program at the Employee Benefit Research Group, a nonpartisan organization in Washington.

The numbers released Tuesday showed a slight decline in median income, but the bureau called the drop, $93, statistically insignificant. Incomes were also roughly flat among whites, blacks, Hispanics and Asian-Americans.

The Midwest, which has been hurt by the weak manufacturing sector, was the only region where the median income fell and poverty rose. Elsewhere, they were unchanged.

Since 1967, incomes have failed to rise for four straight years on two other occasions: starting in the late 1970's and in the early 1990's. The Census Bureau does not report household income for years before 1967, but other data show that incomes were generally rising in the 40's, 50's and 60's.

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